Cryptocurrency traders with limited Bitcoin or altcoins available can use margin trading to multiply the size of their trading account.
Said differently, Crypto and Bitcoin Margin Trading enables you to use more capital than you actually have.
In this guide, we analyze the best crypto margin exchanges and also give you some useful tips to implement when trading with leverage.
Let’s get started!
What is Crypto Margin trading?
To better grasp what margin trading is and how it differs from regular trading, we need to first understand what is meant by the terms margin loan, trade leverage, and liquidation price.
A margin loan is the amount of money the broker, or the cryptocurrency exchange lends to the traders on its platform to execute margin trades. The amount of money lent is dictated by the leverage ratio.
Trade leverage is a ratio that determines exactly how much money is lent by the broker to the trader when executing a margin trade.
The liquidation price is the price level that protects the broker from losing any of the money that was lent to the trader in a losing position. This typically contains a pre-calculated interest rate for the loan along with the trading fees.
Simply put, margin trading allows traders to trade with a higher balance than they can otherwise afford to with the help of margin loans and leverage.
For instance, to open a trade with 1 BTC a trader may only use 0.1 BTC of his own money while taking a 10x leverage margin loan from the broker.
In essence, the trader borrows 0.9 BTC and makes a profit on the entire 1 BTC. However, if it is a losing position, the most the trader loses is his own 0.1 BTC.
Bitcoin and Crypto Margin Exchanges Compared
|Margin Exchange||Fees||Key Feature||Trade|
|BitMEX||0.075% taker fee||Largest crypto margin exchange|
|Deribit||0.075% taker fee||Offers options|
|eToro||$50 withdrawal fee||Simple to use|
|Bitfinex||0.2% taker fee||10+ coins supported|
|Kraken||0.02% taker fee||Established exchange|
|Poloniex||0.2% taker fee||10+ coins supported|
Best Bitcoin Margin Exchanges
As with most things, not all exchanges that offer Bitcoin margin trading were created equally. Some offer high leverage and good liquidity, while others may have low fees or a large range of trading options to choose from.
In the end, the exchange you choose to perform your Bitcoin leverage trading on will depend on which platform best meets your unique requirements.
With that in mind, we have selected 7 of the best crypto margin trading platforms around, giving you plenty of options to work to consider when making your choice:
Easily the most recognizable exchange for crypto margin trading, BitMEX has garnered an excellent reputation in the industry throughout its half a decade of operation.
- Up to 100x leverage
- Multiple supported cryptocurrencies
- Relaxed verification requirements
- Not available for US citizens
- Complicated user interface
- No fiat options
One of the main reasons why BitMEX is so popular is due to the number and variety of assets it offers leveraged trading for, with 8 different cryptocurrency CFDs available, including Bitcoin (XBT), EOS and Ripple (XRP).
Interesting, while BitMEX does allow contracts to be opened for several cryptocurrencies, these are actually bought and sold in Bitcoin, which can be a difficult concept to grasp for newer traders.
In light of this, BitMEX is certainly not for the faint-hearted and is designed for more experienced traders who are familiar with leveraged products.
For its perpetual contracts and traditional futures, BitMEX charge a 0.025% maker, and 0.075% taker fee. Beyond this, Bitcoin futures have a 0.05% settlement fee, while other products are settled free of charge.
BitMEX is also well-known for offering some of the highest leverage in the business, with up to 100x leverage available for Bitcoin (XBT) products, allowing customers to open a position with an initial margin of just 1%.
Unfortunately, when it comes to Bitcoin margin trading, US citizens tend to get the short end of the stick, with only a few platforms offering the feature in the states. BitMEX however, is not one of these platforms, being unavailable in the US.
Overall, with rigorous security practices and excellent liquidity available to users, BitMEX is easily among the best crypto margin trading platforms on the market.
Although Deribit isn’t as well known as some similar platforms, it still manages to hold its own amidst tough competition thanks to the large range of Bitcoin products it offers.
- Competitive trading fees
- Up to 100x leverage
- Relaxed KYC requirements
- Only Bitcoin CFDs supported
- Relatively low liquidity
- Less established than competing platforms
Deribit was built for Bitcoin options and futures, and is one of the only platforms to allow customers to trade Bitcoin CFDs with up to 100x leverage. Currently, Deribit is available for most of the world, including the EU, US, and South America.
One of Deribit’s stand out features is its demo platform, which allows users to play around with 10 BTC worth of play money, helping newer traders get to grips with options and futures trading, without risking their funds.
As it stands, Deribit is currently purely a Bitcoin and Ethereum leverage trading platform. However, the exchange has hinted at the fact that they may be adding more assets in the future.
In terms of fees, Deribit charge market takers between 0.05% and 0.075% for futures, whereas options are charged at 0.04% for makers and takers. For futures markets, market makers can receive a rebate of up to 0.025%.
When it comes to security, Deribit doesn’t leave anything to chance, keeping around 95% of user funds in cold storage, as well as offering optional two-factor authentication for customer accounts.
Since 2006, eToro has become one of the most recognizable online brokers is widely considered one of the key players shaping the online investment industry, particularly thanks to its social trading focus.
- Diverse range of assets to trade
- Social trading tips
- Excellent reputation
- Minimum $50 withdrawal amount
- Maximum 2:1 margin on crypto leverage trading
- $25 withdrawal fee
Despite being most popular for its CFD and Forex trading options, eToro is also one of the few exchange platforms to offer Bitcoin leverage trading, allows its customers to trade 15 different cryptocurrencies.
On eToro each instrument has its own leverage limits and maximum borrow amount, for crypto/fiat and crypto/crypto pairs, the leverage is set at either 1x or 2x, whereas other instruments can be significantly higher, including up to 400x leverage for Forex.
Like most brokers, eToro does not charge any overt trading fees, and instead makes its money on its spread of between 0.75% and 2.9% depending on the trade pair.
It should also be noted that eToro has a $25 withdrawal fee, making it less suitable for smaller traders.
Currently, eToro operates in over 140 countries, with the great majority of countries able to use its services. As it stands, restricted countries include Canada, Japan and Turkey, while US citizens residing outside the USA cannot use the eToro platform.
ByBit is a relatively new cryptocurrency derivatives exchange that is focused on perpetual swaps for Bitcoin and major altcoins. The exchange offers up to 100x leverage.
- Up to 100x leverage
- KYC not required
- Low trading fees
- US Citizens not allowed
- Less liquidity than BitMEX and Deribit
Founded in March 2018 and registered in the British Virgin Islands, ByBit has headquarters located in Singapore and operational offices located in Hong Kong.
Its powerful trading engine and intuitive user interface enabled it to quickly climb into the top 3 crypto margin exchanges by volume. The exchange currently processes an average of $800M in volume.
ByBit’s trading fees are also very competitive: Takers pay a 0.075% fee and makers only pay a 0.025% fee.
On top of this, a “funding fee” is also charged every 8 hours which fluctuates depending on how far the price on ByBit has deviated from its index price.
Finally, it’s important to note that although the exchange does not require KYC verification, it does ban US citizens and will freeze accounts accessing the exchange from a US IP address.
Since its launch in 2008, Plus500 has gone from strength to strength, and now has well over 200,000 customers worldwide, largely thanks to the diversity of assets it makes available to its users.
- Wide range of supported asset classes
- Flawless reputation
- Authorized and regulated in several jurisdictions
- Limited supported digital assets
- Maximum 2x leverage
- Unavailable in the US
Billing itself as Europe’s number one CFD trading platform, Plus500 allows its customers to trade a large variety of assets classes, including shares, forex, commodities, and of course, cryptocurrencies.
In terms of cryptocurrencies, Plus500 offers around a dozen for trading on its platform, with all the major cryptocurrencies covered, including Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP).
These cryptocurrencies can be traded with up to 2x leverage, whereas other assets can be traded with up to 30x leverage.
Being a broker, Plus500 is compensated for its services through its Buy/Sell spread, which can vary throughout the day. In general, these spreads can be considered quite tight, while its unlimited demo account allows users to test the platform free of charge.
Plus500 offers its services to international customers in more than 50 countries, but is not accessible to customers in the United States. Plus500 is best suited to more advanced traders due to the size and scope of its trading platform.
To use the Plus500 platform, all users will need to perform identity and address verification, this can usually be verified online very quickly, but can take longer in some cases.
After launching in 2012, Bitfinex quickly became an almost household name in the cryptocurrency space thanks to the excellent liquidity it provides for major digital assets, with the BTC/USD and ETH/USD trading pairs being it’s most popular.
- Excellent volume for major assets
- Peer-to-peer financing available
- Large range of order types
- Imperfect security record
- Maximum 3.3x leverage
- Limited purchase options
Bitfinex supports a large variety of cryptocurrencies, and allows customers to trade many of these with up to 3.3x leverage, with funding being provided through the Bitfinex peer-to-peer lending platform.
In terms of fees, Bitfinex is relatively standard, charging 0.1% for maker trades and 0.2% for taker trades, with the opportunity for further reductions available to high volume traders.
Bitfinex also charges between 15-18% on fees collected by margin trading providers.
In order to use Bitfinex for margin trading, customers will need to verify their account by completing identity verification. Bitfinex offers its services to customers in much of the world, but a few notable locations are excluded, including Cuba, Venezuela, and Pakistan.
Bitfinex features several customer-side security options including two-factor authentication and IP address whitelisting.
Despite this, Bitfinex has been compromised more than once, and has since ramped up its security, by keeping 99.5% of user funds in cold storage and performing routine penetration testing.
Kraken is currently the oldest of the top cryptocurrency exchanges, being launched in 2011 by Payward Inc. Over the years, Kraken has gone on to establish itself as one of the most popular exchanges for USD traders.
- Up to 5x leverage for some assets
- Reasonable trading fees
- Excellent liquidity for most assets
- Poor customer support
- Extensive verification requirements
- Few crypto/crypto trading pairs
In total, Kraken supports several dozen cryptocurrencies, and offers excellent liquidity for most of these, with its Bitcoin (BTC), Ethereum (ETH) and Bitcoin Cash (BCH) to fiat trade pairs being its most popular.
When it comes to margin fees, Kraken charges an opening fee of between 0.01 and 0.02% depending on the trading pair, in addition to a rollover fee of between 0.01 and 0.02% every 4 hours.
Margin trading is only available to accounts that have completed verification and reached at least ‘Starter’ level, which requires basic information such as your name, date of birth and address.
Starter level accounts have the lowest margin borrow limits, but this can be substantially increased by completing additional verification steps to reach Intermediate or Pro status.
Kraken allows customers to trade several different cryptocurrency pairs on margin, with 8 base currencies, and four quote currencies supported.
The maximum leverage available depends on the trading pair, but can be low as 2x or as high as 5x for pairs such as XBT/USD and ETH/USD.
With an unblemished security record, and availability in the great majority of countries, Kraken is an excellent choice for those looking to get involved with margin trading.
Poloniex is one of the most recognizable names in the cryptocurrency industry, and is particularly well-known among margin traders, since it was one of the first exchanges to offer this feature.
- Low trading fees
- Popular exchange for margin trading and lending
- Large altcoin selection
- Some assets have low liquidity
- No margin trading for US customers
- Forced KYC for all users
Although Poloniex isn’t as popular as it once was, it still maintains an excellent reputation in crypto circles and recently gained additional support after reducing its trading fees to just 0.08% for market makers, and 0.2% for market takers.
For margin lending, Poloniex charges its lenders 15% of the interest earned, while borrowers will need to pay an agreed interest rate.
Currently, Poloniex allows margin trading with up to 2.5x leverage, and is one of the handful of platforms to allow altcoin trading on leverage.
Poloniex offers well over 50 different cryptocurrencies for trade on its platform, though only the most popular of these, such as Bitcoin (BTC), Litecoin (LTC) and Basic Attention Token (BAT) have good volume, with around half of its trade pairs having low volume.
In 2018, Poloniex removed the margin lending and margin trading options for US customers, in a move likely stemming from regulatory uncertainty around the feature.
That being said, this feature is still available for most countries, but not to those in Germany, Pakistan or China.
KYC is mandatory for all accounts, with customers being required to provide their name and address, as well as proof of identity to use the exchange features.
However, the exchange offers excellent security features, making it a secure choice for those concerned about the safety of their funds.
Benefits of Crypto Margin Trading
As an advanced trading feature, margin trading allows savvy traders to potentially earn much more on their trades by opening positions much larger than their own account balance by borrowing funds from elsewhere.
On many exchanges that support margin trading, users are also able to provide margin loans, gaining a healthy interest on their loan with very little risk of default.
Enables you to speculate with more capital than you own
By leveraging your investments, you will be able to earn much more than usually possible, and with as much as 100x leverage possible, what would normally be small gains, can turn into extraordinary profits.
Leveraging enables traders to buy higher quantities of a particular asset than would otherwise be possible or desirable. For example, if an exchange allows you to buy BTC with 2x leverage, you would be able to purchase twice the amount of BTC than you can technically afford, by borrowing the rest from the exchange or lenders.
This enables you to benefit on the price movements of the full position value, magnifying your return and allowing potentially large profits on smaller investments.
Enables you to speculate on the short side
Although many margin trades are made on positions that are expected to gain in value over time, it is also possible to short cryptocurrencies, by betting that the value of a particular digital asset will go down.
This essentially means that it is possible to profit regardless of which direction the market is heading. Because of this, if you find yourself able to predict when the market is about to crash, then you could be in a position to make excellents profits, by opening a short position on a crypto margin trading platform.
As an example, had you shorted Bitcoin during 2018, you could have made over 400% profit, and avoided the drastic losses than many holders accrued over this period.
Reduces your counterparty risk
In addition to being potentially lucrative, crypto leverage trading also acts to reduce your counterparty risk, which is defined as the risk that the counterparty in a contract will fail to meet the obligations they agreed to.
In Bitcoin margin trading, the initial margin provided essentially ensures that the borrowing party will not default on their position.
Similarly, trading on a centralized service that automatically matches, executes and liquidates positions ensures that contracted parties cannot abscond on their obligations.
Costs and Risks of Margin Trading
Margin trading is widely considered to be an advanced trading technique, since although it can lead to extraordinary gains, it is also possible to lose your money very easily if you don’t know what you are doing.
Crypto margin trading, in particular, is one of the riskiest types of trading, and can be a punishing experience if you lack knowledge of the most common pitfalls and mistakes of the practice.
Risk of loss of entire capital
Just like the way margin trading can magnify your profits, your losses are also magnified by the same degree when the markets are not in your favor.
This is particularly worrying for crypto traders in high leverage positions, since the crypto markets are known to be notoriously volatile, with wild price movements being relatively commonplace.
The maximum value that can be lost is known as the liquidation value, at this value, the exchange will automatically close the position, preventing the lender from losing any money.
Because of this, positions taken at high leverage can easily be liquidated or subject to a margin call if the market quickly turns against you, leading to total loss of your initial margin.
Overall, it is best to start slowly with Bitcoin leveraged trading, sticking with low leverage positions until you are more comfortable with the risks involved.
Lending fees need to be paid for the margin borrowed
In most cases, Bitcoin margin trading exchanges will provide traders the additional margin needed to open a position, though this comes at a cost.
Unlike standard trades which typically incur a simple trading fee, margin trades usually have an additional cost involved — funding fees.
Funding fees typically run at a fraction of a percent, but are often cumulative, gradually increasing based on the length of time the position remains open.
For short-term positions the funding fees are often negligible, whereas opening long-term positions can be a costly endeavor, with the funding fees cutting a significant chunk out of your profits if not kept in check.
Bitcoin Margin Trading Strategies
As with any investment, it is wise to know your market before risking your money. Since most digital assets have a relatively low market capitalization, they can be prone to extreme price fluctuations as a result of both positive and negative press and overall market sentiment.
This volatility can be considered both a curse and a blessing for margin traders, since it allows traders to confidently both short and long Bitcoin and other cryptocurrencies.
Opening a long position essentially means you expect the price of Bitcoin or another cryptocurrency to increase in the future. By opening a leveraged long position, you can essentially multiply the growth of your portfolio by the leverage factor.
For example, let’s say Bitcoin’s current market price is $5,000. You expect that BTC will increase by 10% in the next 3 months to reach $5,500.
Now, let’s say you opened a trade with 6x leverage, buying $30,000 of Bitcoin using an initial margin of $5,000, automatically set to close at $5,500. 3 months later, your position would close, and you would be up 60%, walking away with a tidy profit of $3,000.
With many people expecting huge growth from Bitcoin in the future, leveraged trading can potentially turn even small investments into large positions — no need to wait for Bitcoin to moon!
In contrast to long positions, shorts are a bearish position, with traders expecting an asset to decrease in value over the length of the contract.
Being a volatile asset class, cryptocurrencies tend to experience sudden price dips, often losing 5-10% of their value over the course of just days. Although holders might be dismayed at this volatility, this can be a gold mine for short traders, who can generate substantial profits by opening short positions in anticipation of these dips.
As an example, you’ve just seen some negative news that you expect will adversely affect the BTC. At a BTC value of $5,000, you open a short position for 10 BTC at 1:100 leverage, which requires $500 in margin collateral.
Then, as it expected, negative news knocks the Bitcoin price by 10%, and you capitalize on this by buying back 10 BTC at $45,000 with the same leverage. Since this is a short position, you deduct the closing price from the opening price to calculate your profit, which in this case would be $5,000 before fees.
Hedging is used to minimize exposure to risk when trading, typically by opening a short hedge to protect against the risk that an asset might decrease in value in the short-term.
Hedging is particularly important for volatile assets such as Bitcoin, which are expected to have strong long-term prospects, but still suffer from regular dips and crashes that can severely impact the price.
By carefully opening short positions during transient price dips, traders can effectively reduce their downside risk if they already have a long position open.
Unfortunately, direct hedging is often not allowed on most exchanges, as you typically can’t open both a long and short position for an asset at the same time. However, this can usually be circumvented by indirect hedging, e.g. going long on XBT/EUR, while shorting XBT/USD.
Bitcoin Margin Trading Tips
As with all investments, it is wise to exercise caution first and foremost, as while it is quite possible to make substantial profits, soul-shattering losses can also be one bad move away.
Because of this, we recommend taking the time to carefully research all the moving parts involved with crypto margin trading, including the exchange platform you intend to use, the price history of the asset you intend to trade, and the risks involved in doing so.
With that said, here are our top 3 tips to get you started on your journey:
Do not over leverage
Although it might be tempting to open a trade with extremely high leverage to take advantage of some price movement, doing so can expose you to avoidable risks.
Because Bitcoin is relatively volatile, and volume isn’t always high, it is sometimes possible to create artificial wicks in the market to shake out over-leveraged traders.
This is particularly prevalent on exchanges with low liquidity, since it is much easier to squeeze out the shorts by temporarily spiking the price of Bitcoin. Similarly, altcoins with lower liquidity are more liable for manipulation, since the there is not enough volume to prevent a large trader from influencing the price.
In light of this, we recommend sticking to a relatively low leverage, particularly when trading on a less established platform.
Do not margin trade with more capital than you can afford to lose
As with all trades, it is strongly recommended to only trade with what you can afford to lose. Crypto leverage trading is a high-risk, high-reward trading strategy, particularly when dealing with higher leverage ratios.
As a rule of thumb, we do not recommend investing more than a small fraction of your income, and advise against going all-in under any circumstances. Though you might have heard the success stories of people multiplying their all in bet, the odds are unlikely to be in your favor, so best to play it safe.
If you find yourself risking money as a means to get out of debt, or pay the bills, then it is wise to avoid leveraged Bitcoin trading, as things can go from bad, to terrible at the drop of a hat.
The truth is, more traders lose money than make money, only time, experience and luck can swing things in your favor, but don’t bet on this or you might end up in a sticky situation.
Pick a trustworthy bitcoin margin exchange
One of the most important considerations when margin trading is choosing a good exchange to work with. Typically a good exchange is one that is defined as having excellent liquidity, high volume, and strong security.
Unfortunately, cryptocurrency exchange platforms have a bad reputation of being compromised, and it’s inadvisable to store large amounts of cryptocurrency on one.
Do not make the mistake of confusing popularity with security, as this is often not the case. Excellent reputation and a solid security record go a long way with crypto investments, so be sure the platform you choose to work with has both.